Low and middle income people are often the victims of fraud, but in most cases it is consumer fraud not investment fraud. Because of their circumstances low and middle income groups buy used car lemons, overpay for items at ‘no credit check’s store or just end up buying useless and worthless products.
But higher income people are often the victims of fraud also, except in their case it is almost always investment fraud. In fact, given the amount of investment fraud that has been uncovered it would appear that wealthy people are pretty easy to fool.
Four years ago this week, Marc S. Dreier, a high-flying lawyer, was arrested and later charged with defrauding his clients of $700 million. A few days later, Bernard L. Madoff’s fraud was uncovered. Totaling an estimated $65 billion, Mr. Madoff’s fraud was in a class by itself. And then, a short time afterward, some of the brokers who had been selling fraudulent certificates of deposit for R. Allen Stanford began to turn on him; he was arrested in February 2009 and later convicted of a $7 billion fraud
After all one reason many of them because wealthy is through unbridled greed and a sense of entitlement, so presenting them with high return, no risk, fraudulent investments is probably a piece of cake.
To combat this fraud there is the suggestion that there be a Madoff Day in which everyone examines whether or not they are the victims of financial fraud.
These schemes collapsed with the economy in 2008. But on their anniversaries, it may be a good time to ask whether you have done all you can to lower your risk of being caught up in a similar fraud. Call it Madoff Day (celebrated on Dec. 11, the day of his arrest).
Of course, this is not a difficult process. All one needs to do is ask oneself a few questions.
- Am I being greedy?
- Am I being stupid?
- Am I earning returns I should not be earning?
- Do I believe in the “Greater Fool” theory, that I am a great fool but there must be bigger fools out there who will take these worthless investments off my hands?
Answer yes to any of these and you too need to celebrate Madoff Day.